Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents

question 94

Multiple Choice

Figure 8-7
The vertical distance between points A and B represents a tax in the market.

-Refer to Figure 8-7.Which of the following statements is correct?

• A) Total surplus before the tax is imposed is $45.
• B) After the tax is imposed, consumer surplus is 25 percent of its pre-tax value.
• C) After the tax is imposed, producer surplus is 36 percent of its pre-tax value.
• D) All of the above are correct.

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Definitions:

Variable Expenses

Costs that change in proportion to the activities or volume of a business.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding expenses and revenues that are unrelated to the primary business activities.

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead.